Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the Deputy for his question and his elaboration on it. As indicated in the spring economic statement, fiscal space of €1.2 million to €1.5 billion will be available for new expenditure or revenue measures in budget 2016. This estimate of fiscal space was designed to ensure compliance with the fiscal rules that Ireland is now subject to under the preventive arm of the Stability and Growth Pact, in particular the expenditure benchmark pillar. This quantum of fiscal space formed the basis for discussion at the national economic dialogue held in July at which there was a broad consensus that budgetary demands would have to be met from this package. The exact size of the fiscal space will be finalised in the coming weeks taking into account various inputs, such as the projected inflation rate - GDP deflator - any discretionary tax measures and other elements of general government expenditure outside of central Government. Inflation is taken into account in the calculation of fiscal space through the incorporation of the GDP deflator in the expenditure benchmark. It should also be noted that the fiscal space will have to accommodate all Government priorities, including additional expenditure arising from demographic pressures.

A budgetary package of between €1.2 million and €1.5 billion will provide for increases in key expenditure areas and reduce the high tax burden on the squeezed middle. I reiterate the importance of delivering a budget which is consistent with the pre-announced fiscal space. The quantum is appropriate from an economic and fiscal policy perspective, a view which is shared by the Irish Fiscal Advisory Council, as stated in its recent pre-budget statement. This will give further confidence to the markets that the Government remains committed to sensible and prudent fiscal policy.

With regard to 2015, the stability programme update published in April forecast a deficit of 2.3% of GDP. Notwithstanding emerging pressures on expenditure, given the performance of revenue through the first eight months of the year, I am confident that we will at least achieve, if not better, this target. Importantly, it is now increasingly likely that the debt ratio will fall below 100% of GDP at the end of the year.

In response to the issues raised by the Deputy when he introduced his question, the figure of 2.3% is one that I will achieve. It was in the spring statement. If a lot of extra tax accrues up to the end of September, I am still bound by the figure of 2.3%. Of course, if Government Departments overspend - and we know that the Department of Health is already ahead of budget allocation - that must be met. The point I was making to Deputy Michael McGrath is that I believe there will be sufficient taxes above profile to meet issues that arise on the expenditure side. Some Departments are below their level of expenditure so there is a possibility of diverting expenditure budget funds to the areas in which overruns have occurred from those where there has been an underspend.

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